November 23, 2024

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Shoppers browse cosmetics at a Prada pop-up at Shinsegae department store in Gangnam-gu, Seoul, Wednesday. (Yonhap)

South Korea’s domestic consumption is expected to recover gradually after the latter half of this year, but an aging population and sluggish self-employed businesses could dampen the rebound hope, the country’s central bank said Friday.

The Bank of Korea said that the recovery of private consumption remains delayed as the debt repayment burden has risen due to high prices and interest rates in a report analyzing the current economic situation. It said deferral in corporate performance and slow income improvement stemming from sluggish business conditions for the self-employed also hampered private consumption.

“The economy is likely to show a balanced growth as the gap between exports and domestic demand narrows with outbound shipments continuing to pick up while private consumption gets back on track,” a BOK official said.

Changes in demographic structure, such as low birth rate and aging population, are structurally holding back the recovery in consumption. The slump in passenger car sales since the second half of last year has also been a factor in the sluggish consumption.

The BOK expected that household purchasing power would rebound in the second half of this year with an increase in nominal wages backed by advancing corporate performance.

The arrival of the replacement period for durable goods such as IT devices will alleviate dull consumption.

Meanwhile, the central bank on Thursday lowered its projection for consumer price to 2.5 percent from its previous estimation of 2.6 percent.

By Park Han-na (hnpark@heraldcorp.com)